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Sales Organization

The ideal structure of a sales team depends on several factors, but the stage of the startup and the resulting maturity of the sales process is likely the most important one. Sales often starts very simply with founders doing most of the selling in very early-stage startups and develop over time to complex and multi-dimensional organizations.

The typical development stages are:

  1. Founder sales (possibly with some support functions)
  2. Dedicated sales team
  3. Growing sales organization with dedicated management structure
  4. Specialization and diversification

Sales roles

A B2B sales team typically consists of the following roles:

  • VP of Sales (or Head of Sales): The person in charge of the sales team. Handles day-to-day management as well as aspects such as sales quota, compensation, cross-functional collaboration and hiring processes.
  • Sales Directors: The management layer below the VP of Sales is in charge of a particular region or product line, managing a dedicated sales group for this part of the business.
  • Account executives (AEs): They are the main owners of the customer relationship, in charge of moving the process along with prospects. AEs typically take an account over once a lead is qualified and take the process up to the closing of a deal.
  • Sales Development Representative (SDRs): Their job is to reach out to prospects and answer inbound requests in order to qualify new leads. Once a lead is identified to be interesting (by defined criteria), it is handed over to an AE. Some companies use separate Business Development Representatives (BDRs) or Market Development Representatives (MDRs) who do market research in order to identify potentially relevant prospects, work with marketing to generate leads and handle most inbound requests.
  • Sales Engineers (SEs): For more technical products, SEs support AEs in providing demos, gathering customer requirements and answering technical questions. They also often run proof-of-concept phases.
  • Sales Analysts or Sales Support Experts: These support functions work closely with AEs to prepare prospect-specific materials, proposal documents and contracts, as well as tactical CRM data management.

Additionally, there is often a department (or individual) in charge of sales operations. See here for details under the relevant section.

Organizational Structure

Smaller sales team often use a simple functional structure: AEs and SDRs work closely together and either report to the VP directly or to a director who is in charge of a particular part of the business.

As the business grows, there are different ways to structure the sales team, depending on the nature and priorities of the business:

  1. Geographical (territory) organization: This approach breaks sets up focused sales units based on the covered area.
  2. Product line organization: If a company sells different products to different customers, these teams focus on the relevant target segment.
  3. Industry-specific organization: If a company sells the same products to different, distinctive target industries, it often makes sense to have specialized sales teams who understand the different needs of target industries particularly well.

A level below this general structure, sales teams are sometimes organized into sales pods that consist of one or several AEs, SDRs, SEs, analysts and potentially customer success managers. A pod is in charge of covering a particularly well-defined customer segment, and in some enterprise cases, even just one very large account with multiple touchpoints (such as a large multi-national corporation). A pod organization can be very effective if a deep understanding of customer situations is crucial for sales success.

The right ratio between the different roles strongly depends on the nature of the business, in particular sales cycles, the shape of the funnel, and contract values. Some companies use a ratio of 2-3 SDRs per AE, while in other companies the ration is inverted. It is the responsibility of sales leadership to constantly measure the performance of the team and adapt the organizational structure accordingly.

Collaboration with customer success

The sales and customer success organizations have to work closely together to optimize outcomes. While sales is in charge of winning new customers, CS plays a key role in account expansion and retention.

There are different philosophies for how to structure this collaboration:

  • Integrated customer success: Some companies integrate CS functions directly in sales teams, for example in the pod structure explained above or when the sales and CS teams are still very small.
  • Peer structure: Some companies separate the two departments on purpose under the assumption that sales primarily should drive revenue while CS is in charge of keeping customers happy and providing in-depth customer feedback to the product team. In this setup, CS often reports to the CPO or even CEO directly.
  • Unified revenue organization: Particularly larger startups often run the entire customer-facing organization (sales, marketing, CS) under the common responsibility of a chief revenue officer.

All of these approaches can work. In general, very small companies tend to have an integrated CS function, then migrating to a peer structure as volume grows but direct customer feedback remains crucial. More mature startups often then switch to a unified revenue organization because it tends to be most efficient at capturing a well-understood market opportunity.

Forecasting

One of the more difficult tasks a sales organization has to master is sales forecasting. The CEO and CFO want to know well in advance how business is going and where the quarter is going to land. This visibility has repercussions on a lot of other parts of the company.

Some of the key enablers of good forecasting are:

  • Frequent one-on-one meetings between sales leadership and individual AEs where each customer opportunity is being discussed. The better sales leadership understands the customer situations (without micro-managing), the more consistent the forecast.
  • Clean and current data in the CRM system. The best sales teams can pull a forecast at any time because expected contract values, closing dates and closing probabilities are well maintained in the system.
  • Constant feedback cycles. Sales teams should snapshot their forecasts at multiple points in time and then compare actual results later. This gives the sales team a feedback for learning, both on a team and individual level.

Ramp-up time

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Newly hired salespeople are rarely fully productive right out of the gate. They first have to understand the product, customer needs and market and develop their own approach for winning customers. Only then will they approach their goals and reach full quota.

How long it takes for a salesperson to ramp up to full output is different by product type, industry and maturity of the business, but it is an essential factor to measure and manage. A ramp-up time of six months is not unusual in B2B software, for example, and it can be as long as 12-18 months for products with long sales cycles. Many budgets and sales goals miss their target simply because assumptions about ramp-up time were too optimistic.

It is not rare that a new sales hire doesn't reach full productivity at all. Some sales leaders expect only one in five new hires to ever reach this level. Constantly measuring progress is therefore essential. Underperformers should first be supported by additional training and help, but if a new hire stays under the expected productivity curve consistently, it is better to let them go sooner than later. This is always a hard step, particularly for new founders, but necessary. Keeping underperformers on the team can strongly demotivate a sales team, leading to a much worse overall outcome.

Pitfalls

Sales management is one of the more tricky tasks in startups, and there are a few typical pitfalls to avoid:

  • Getting specialization wrong: There are different ways in which a growing sales organization can introduce specialization: By product/geography/industry, by function (e.g. lead gen in marketing, everything else in sales), separating CS from sales, etc. Management should think long and hard about which kind of specialization makes sense at which point. There are no hard and fast rules, but generally speaking it is more important to drive specialization by customer needs (e.g. an industry demanding particularly deep understanding from salespeople) vs. internal organizational needs.
  • Short-term thinking: Of course every sales organization is under constant pressure to deliver its number. Many teams fall into the trap of the "end of quarter panic attack" when they desperately want to reach their goals and start doing things that are less than intelligent, such as giving unnecessary discounts. While some of this urgency is needed, it is the job of sales leadership (and the CEO) to counterbalance this short-term thinking and make sure that longer-term goals are not neglected.
  • Lack of training: Quite a few salespeople think that training is a waste of time and that they should spend all their time "on the street", charming customers with their sparkling personality into closing a deal. For most B2B products at least this rarely works nowadays. Customers are better informed than ever and expect to have an in-depth conversation about their needs and possible solutions with a salesperson. Sales teams therefore need to make sure that sellers are constantly trained on the product, how to talk about customer needs, competitive differentiation, etc.
  • Insufficient compensation system: Setting the right incentives with your sales compensation system is crucial. Many companies neglect longer-term revenue development for short-term results, for example.
  • Lack of alignment with adjacent departments: Sales is a tough job. Going out there and trying to convince prospects every day, hearing "no" most of the time, is anything but easy. It is therefore normal that sales expects other departments to do their best to make this a bit easier. When sales teams get the impression that other departments don't pull their weight — marketing might not pull in enough strong leads, the product team is delayed in rolling out new features, CS is losing existing customers, and so on — internal conflicts and unproductive finger pointing can arise very quickly. It is therefore essential to align the incentives and expectations of all these departments. Internal transparency is crucial, and common empathy goes a long way. Some companies for example require product managers and marketing staff to work as SDRs for a bit so that they can understand how tough this job is and how much work the product messaging still might need.